The prosperity index compiled by the China Nonferrous Metals Industry Association (CNIA) indicated that the recovery of the nonferrous metal industry will be interrupted in the first quarter. Product prices are expected to fall while costs will rise, and corporate economic benefits will decline, according to CNIA.
Smelting enterprises in China that have resumed production now face a risk of or either reducing or suspending operations as their sulfuric acid inventories have expanded significantly. The association has demanded China’s government to coordinate with the relevant departments to suspend the import of sulfuric acid and raw materials for sulfuric acid production. CNIA confirmed that a large lead-zinc smelter reduced production by 30pc due to sulfuric acid expansion and while a copper smelter reduced production by 20pc.
Aluminium, lead, zinc smelters have not suffered production cuts despite the Covid-19 outbreak and have continued to maintain normal production. CNIA has recommended that collection and storage of non-ferrous metal inventories can serve as a reserve for metal supplies for downstream industries that are yet to resume production. Most copper and aluminium processors and other downstream consumers such as real estate, batteries, electroplating, air conditioning, and electronic products are yet to restart post the Spring Festival holidays.
CNIA warned that delay in construction activity will lead to a temporary decline in metal demand. Of the 107 domestic construction projects active in China, 69 projects have resumed activity, while another 38 construction projects are likely to resume by March 15. Total investment in these projects is CNY92.211bn ($13.16bn).The association admitted that there is increased pressure on corporate funding.
Finished products inventories at non-ferrous metal enterprises have increased while turnover speed has slowed leading to a lag in capital recovery. A large private copper smelter reported that its sales cycle had extended by 15-20 days in the first quarter due to the virus.
Global spread of Covid-19 has led some countries to refuse Chinese ships from docking at their ports or delay their arrival. Ships engaged in non-ferrous ore are also restricted. Many countries have halted direct flights to China and suspended visas.
In China’s Guangdong, Jiangsu, and Zhejiang provinces where private copper and aluminium private companies are located, despite resumption of production, smelters are operating at low capacity utilisation due to a shortage of workers.
Of the 1,093 non-ferrous metal enterprises, 76.5pc are operational, and out of 241 non-ferrous smelters, 90.5pc have resumed production as on Feb 26.